With inflation in the United States remaining stubbornly sticky, especially core statistics, the price of silver has fallen below $19.00 on the news. Inflation in the United States is now at 4-decade highs, breaking the 6.5% mark. Silver is selling for $18.81 per troy ounce against the US dollar at the time of this writing, down 1.40% from its previous high.
Traders brace for further Fed rate hikes, sending XAG/USD down after strong US CPI.
Data released in the US indicated both headline and core inflation remain elevated, with core CPI above predictions at 6.6% YoY, higher than August’s 6.3%, with the increase being mostly attributable to transportation services, medical care, and housing. In the meantime, CPI annual growth was 8.2%, down from 8.3% the previous report and down about 1% from the peak in June 2022.
As a result, rates on US Treasury bonds, including the 2-year and 5-year notes, spiked to 4.46 and 4.24 percent, respectively, as investors prepared for another massive rate hike from the Federal Reserve at its upcoming meeting in November.
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In a similar vein, the yield on the benchmark 10-year US note has dropped to 3.98% from 4.08% prior to the announcement of hot US inflation data. The US Dollar Index, which measures the greenback’s strength against a trade-weighted basket of currencies, is currently down 0.03% at 113.169, having earlier reached a day’s high of 113.920.
In other news, the number of initial claims for unemployment benefits in the United States during the week ending October 8 was 228K, an increase over the previous week’s reading and higher than the 225K predicted. The US Nonfarm Payrolls report from last week contradicted the optimistic flash that the job market is relaxing.
Given the current conditions, the CME FedWatch Tool indicates that a rate hike by the Federal Reserve of 75 basis points is completely priced in at 99%.
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After reaching a daily high at $19.30, XAG/USD is anticipated to continue extending its losses and fall below $18.70 due to the heavy influence of high yields on US Treasury bonds. Traders can also look to US Treasury Inflation-Protected Securities (TIPS) as a proxy for actual yields; at one point in time, the yield on a 10-year TIPS was 1.757%; currently, it has steadied around 1.658%.
Source: Reuters
Following the release of the US inflation report, additional Fed speaking is on tap for the US schedule, with Atlanta Fed President Raphael Bostic first to cross wires. Retail sales and consumer sentiment data from the University of Michigan will provide fresh insight into the state of the US economy this coming Friday.
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